Park Han-sol reports on Korea's financial regulators, along with fintech and insurance. She previously wrote about the art world, from biennales and exhibitions to fairs and auctions, with a focus on Seoul and the figures shaping the scene. Before joining The Korea Times, she spent a year at ABC News' Seoul bureau, contributing to coverage of major Asia-Pacific events.
Homeplus heads toward liquidation as court pulls plug on rehabilitation
A tarpaulin banner outside a Homeplus store in Seoul, June 28 / Yonhap
By Park Han-sol
Meritz continues holding back $130 mil. rescue loan for cash-strapped retailer
Homeplus, Korea’s second-largest hypermarket chain, is heading toward liquidation after a court terminated its rehabilitation proceedings, ruling that the cash-strapped retailer had no viable path to carrying out its turnaround plan, according to industry officials, Friday.
The Seoul Bankruptcy Court dismissed Homeplus’ revised restructuring proposal — which called for sweeping cost cuts, including shuttering nearly half of its stores and reducing its workforce — after the company failed to secure the minimum 200 billion won ($130 million) in fresh funding needed to execute the plan.
“The minimum funding required to implement the plan has yet to be secured,” the court said. “As the proposal is therefore not feasible, the rehabilitation proceedings will be terminated without further hearings.”
Homeplus has 14 days to appeal. If the ruling stands, the company will be dissolved and creditors will be free to pursue legal remedies, such as asset seizures and foreclosure.
Within hours of the decision, the troubled retailer again appealed to its largest creditor, Meritz Financial Group, for debtor-in-possession financing.
Its owner, private equity firm MBK Partners, has accepted conditions it once described as “practically impossible” in an effort to unlock part of that loan, the company said.
Meritz had conditionally approved a 100 billion won loan — half the amount needed under the restructuring plan — provided the funds were released from escrow against a personal guarantee from MBK Chairman Michael ByungJu Kim. MBK previously rejected that condition as unrealistic but has now agreed to it.
“Despite repeated appeals from numerous stakeholders over the past several weeks, it is regrettable that Meritz continues to withhold funding, saying that the joint guarantee provided by MBK Partners and Chairman Kim is insufficient,” Homeplus said in a statement. “We urge Meritz to extend the 200 billion won loan needed to keep the rehabilitation process alive.”
Homeplus, wholly owned by MBK Partners, sought court protection in March last year after facing mounting financial strain amid a prolonged slump in Korea’s hypermarket sector.
Friday’s ruling is expected to ripple far beyond the retailer itself, raising concerns over the livelihoods of its roughly 12,000 employees, as well as the thousands of suppliers and contractors that rely on the chain.
Regulatory sanctions
Separately, MBK Partners is facing possible sanctions from financial authorities over the Homeplus debacle.
The Financial Supervisory Service’s (FSS) sanctions review committee on Thursday decided to seek disciplinary action against the private equity firm, including suspending key executives from their duties, according to industry sources.
If finalized, it would mark the first major sanction imposed on the general partner of an institutional private equity fund in Korea.
The watchdog declined to comment on the specificities of the committee’s decision, noting the disciplinary process remains underway.
FSS has reportedly concluded that MBK violated the Capital Markets Act through improper business practices and inadequate internal controls.
The case centers on changes MBK made to investment terms linked to its acquisition of Homeplus. The watchdog argues the firm gave up certain redemption rights in a way that benefited Homeplus but may have reduced the chances that investors, including the National Pension Service, would fully recover their money.
MBK disputed that assessment.
“The changes to the redeemable convertible preferred shares terms were a reasonable investment decision intended to improve Homeplus’ finances and preserve its enterprise value, ultimately protecting investors’ interests,” the firm said in a statement. “We will continue to present our case through the appropriate legal process.”
FSS’ proposed sanctions must be approved by the Financial Services Commission before they become final.